Demand for platinum has been stagnant for the last six years. A retreat in investment was made up by an advance in industrial use. The major source of demand for platinum is in the automotive industry as an anti-pollutant in catalytic converters. China is the largest fuel combustion vehicle market and shows little sign of stopping its growth in this industry. The China Association of Automobile Manufacturers reports this year's August sales, and production, to be up, year over year, 23% and 28.9%, respectively. Global car production growth is expected to slow, but 2016 is still anticipated to produce 89 million cars, up from 88 million in 2015.
Jewelry demand is up 3% in Q2 of 2016 from the prior quarter, indicating momentum. India, after a brief strike, has seen an astounding 25% year-over-year increase in Q2 2016 in platinum jewelry sales. A drop in the number of Chinese wedding registrations resulted in a 4% year-over-year decrease in platinum jewelry demand from this Q2.
Industrial demand has been making slow advances in recent years, increasing by 1% each quarter since Q3 2014. Industrial demand, in order from greatest to least, is sourced from chemical, medical, electrical, glass, petroleum, and others.
Platinum investment has seen three quarters of ETF outflows but these have recently tapered and are dwarfed by the increase in physical investment demand. In 2015, bars and coins increased by 525koz, while ETF holdings decreased by 240koz. Japanese coin and bar investors led demand in the first two quarters of 2016, recording an increase of 140koz and 110koz in Q1 and Q2, respectively. Interestingly, in the U.S., 10,000 American Eagle platinum-proof coins were made available this past June and sold out in under an hour. There seems to be a disconnect between investors who prefer physical platinum and those who prefer ETF holdings; the former being bullish and the latter bearish.
Given these figures, I believe platinum demand will grow slowly and modestly over the next few years as more motor vehicles are produced, jewelry-consuming Chinese and Indian middle classes grow, and significant investor interest returns, particularly from the ETF segment
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